Ecuador has the third-largest oil reserves in South America and is the smallest oil producing member of the Organisation of Petroleum Exporting Countries. According to the data from the United States Energy Information Agency, the country has 8.8 billion barrels of proven crude oil reserves as of January 2015. Most of the oil reserves of the country are in the Oriente Basin—an area located within the Amazon.

Oil exploration in Ecuador began in 1964. The United States-based Texaco Petroleum Company focused their attention on the northeastern part of the country. This eventually led to the discovery of the Lago Agrio Oil Field near the city of Nueva Loja in the province of Sucumbios.

The Agrio Oil Field proved to be profitable. Over a period of 20 years, Texaco was able to extract 1.7 billion barrels of oil that amounted to $25 billion in profit.

But there was a downside to the fledging oil industry in Ecuador. Several nonprofit organisations and local citizen have expressed concerns over the alleged unlawful and unethical practices of Texaco beginning early 1990s. Drilling activities from 1964 to 1990 were accordingly accompanied with deliberate dumping of more than 18 billion tons of toxic water that spilled in bodies of water. The company also allegedly discarded hazardous waste in hundreds of open pits within the Amazon forest. These concerns marked the beginning of a series of oil contamination lawsuits that pitted Ecuador versus Chevron.

Texaco handed the oil fields to the national oil company EP Petroecuador in 1992. The following year, American lawyer Steven Donzinger filed a 30,000-member class-action lawsuit in New York. His lawsuit represented the indigenous people of Ecuador supposedly affected by the environmental travesties of Texaco. The Ecuador government agreed to release the American oil company from legal responsibilities in 1995 in exchange for a cleanup operation.

The American court dismissed the case filed by Donzinger for improper venue in 2011. This ruling was tantamount to the non-recognition of foreign judgments for environmental injury in the U.S.

Texaco merged with Chevron Corporation in 2001. Now absorbing all the issues and scandals associated with the operation of Texaco in Ecuador, Chevron accused critics for targeting them for mere extortion and financial gains. In addition, the oil company argued that Petroecuador and the Ecuador government should be held accountable for the damage and cleanup. They further contended that much of the present damage came from activities that transpired after Texaco turned over the oil fields to Petroecuador.

Blocked from pursuing case against Chevron in American courts, plaintiffs sued the oil company in Ecuadorian court for $6 billion in 2003. The American oil company argued that there was no point for another lawsuit because the Ecuador government had release it from legal responsibilities following a series of cleanup operations. Furthermore, studies from the company revealed the levels of chemicals in the soil and water were negligible. There was even no solid evidence implicating Texaco for health hazards allegedly caused by its previous operation.

An Ecuadorian judge in 2011 discarded the arguments made by Chevron and handed down a landmark ruling. The court ratified the ruling in 2013. The Ecuador Supreme Court ordered the US company to pay $9 billion—one of the largest environmental awards in history.

The plaintiffs had a hard time collecting the judgment however. In March 2014, a US federal judge blocked the Ecuadorian government from using US courts to collect the $9 billion judgment made by an Ecuadorian court. In a nearly 500-page ruling, District Judge Lewis A. Kaplan said the Ecuadorian judgment was a result of fraud. Reports used as court evidence were falsified and Donzinger was responsible for coercing Ecuadorian judges into letting his team ghostwrite independent expert reports and portions of the final ruling.

There were many criticisms against Donzinger nonetheless. He allegedly exploited the case and pitted the people of Ecuador versus Chevron for his personal and financial gains. Even the federal court report revealed Donzinger was guilty of violating the Federal Racketeer Influenced and Corrupt Organisation Act and the Foreign Corrupt Practices Act, committing extortion, laundering money, witness tampering, and obstruction of justice.

Donzinger filed other cases in other courts. For instance, in December 2014, the Supreme Court of Canada held oral arguments to decide whether the country should get involved in the epic oil pollution case. There are also other cases filed in courts in Argentina and Brazil.

A new ruling, however, favoured Ecuador versus Chevron. In March 2015, the International Court of Justice ruled that Chevron indeed caused severe environmental damage. Take note that the US company initially appealed the ruling of the Ecuadorian Supreme Court through the International Court, arguing that the case was redundant and the Ecuadorian judgment violated bilateral investment treaty with US. The International Court of Justice argued that the case involved individual rights, therefore leaving the agreement signed between Ecuador and Texaco null and void.

But the oil contamination lawsuits pitting Ecuador versus Chevron are far from over despite the aforementioned recent developments. The legal liability of Chevron remains unclear. Ecuador and supporters need to come up with more evidences and arguments that would pin down the American oil company.

Further details of the New York court ruling against Ecuadorian plaintiff are in the article “Aguinda v. Chevron Texaco” authored by Lucien D. Dhooge and published in 2009 in the Journal of Transnational Law and Policy.